PARIS  - The future for French Prime Minister Michel Barnier's government looks bleak, with his struggles to push the 2025 budget through a polarised parliament increasingly likely to end in the toppling of his fragile coalition.

Barnier's government could fall before Christmas, and perhaps even by next week, if far-right and leftist foes force a no-confidence motion that he is likely to lose, according to a dozen sources from across the political spectrum.

Even if Barnier survives, the sources said, he will only do so by caving in to demands to soften spending cuts, further weakening the country's fragile public finances and denting investor appetite.

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Much remains in flux, with Barnier's team in non-stop negotiations with Marine Le Pen's far-right National Rally (RN), which props up his administration, and other parties to avoid plunging France into its second political crisis in six months.

In a TV interview on Tuesday, Barnier described the current situation as "extremely concerning," predicting "extremely serious and turbulent conditions on financial markets" should his government fall.

"The government will fall," President Emmanuel Macron reportedly told allies, according to a Tuesday story in Le Parisien that the Élysée swiftly denied.

Investors reacted skittishly on Wednesday. The risk premium for French government debt rose to its highest level since the euro zone debt crisis of 2012, while bank shares dragged down the CAC 40.

Budget blues

The budget bill lies at the heart of France's political malaise. It seeks to rein in France's spiralling public deficit through 60 billion euros ($62.85 billion) in tax hikes and spending cuts. But it has proven to be kryptonite for Barnier's right-wing government.

The bill was rejected by the deeply divided lower house - rendered nigh-on ungovernable by Macron's ill-fated decision to call a snap election that delivered a hung parliament - and is currently being debated in the Senate.

READ MORE: France's Le Pen threatens to topple government on cost-of-living concerns

With his options dwindling ahead of a mid-December deadline, Barnier said on Tuesday it was likely he would invoke article 49.3 of the constitution, which allows the text to be adopted without a vote. Such a move would invariably trigger a no-confidence motion against the government.

For weeks, Le Pen and her supporters have been ratcheting up the pressure on Barnier, saying they will vote to bring down the government if their demands to shield households, small-businesses and pensioners from the squeeze are not met.

Writing in Le Figaro newspaper on Tuesday, Le Pen appeared to lay the groundwork for toppling the government, denying public-sector salaries would go unpaid and rejecting rivals' depictions of her party as "artisans of chaos."

Trial and error

Le Pen's imperilled political fortunes may be influencing her decision-making, sources said.

Widely seen as the front-runner in the 2027 presidential election, she now faces the possibility of being barred from competing after prosecutors sought a mandatory five-year ban from public office for her alleged role in an embezzlement scheme. She denies the allegations.

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An aide to centrist lawmaker Gabriel Attal, Barnier's predecessor as prime minister, said Le Pen's threats to topple the government were a bid "to eclipse the trial saga."

After leaving court on Wednesday, Le Pen denied the legal case had any bearing on her political decision-making, telling reporters she was calm ahead of a verdict due on March 31. A senior RN party leader told Reuters there was still no definitive plan on what course of action to take.

Still, a decision to topple the government, most likely in cahoots with the left, is not without risk for Le Pen's far-right party, which has moved from the fringes to the mainstream and is wary of being blamed for the resulting chaos.

More than half of French people believe a no-confidence vote that unseats the government should be avoided, according to an Elabe poll for BFM TV released on Wednesday. If Barnier's government fell, 63 percent of those polled said they would be in favour of Macron resigning.

"If we can avoid censure we will avoid it," RN lawmaker Thomas Ménagé told Reuters. "But if by mid-December (Barnier) has not listened to the 11 million French people who voted for us ... we will responsibly vote to topple this government."

READ MORE: French PM Barnier confirms he will raise taxes for bigger companies

Barnier's team has already signalled it is willing to water down the bill, with Budget Minister Laurent Saint-Martin acknowledging this week that the deficit might be slightly higher than the 5 percent of output originally foreseen.

Barnier's best hopes of survival may come from splintering the leftist block the RN would need to bring down the government, targeting more moderate members of the Socialist Party (PS) such as former President Francois Hollande.

"PS lawmakers must see where they stand in relation to (the hard-left) France Unbowed party," a Barnier aide told Reuters. "Everyone will do what they think is right."

Hollande was circumspect about his plans, telling Reuters it was up to the prime minister to respond to the Socialist Party's proposals.